Retail sector needs clarity on FDI

The ambiguity surrounding a clear definition of e-commerce and the laws permitting foreign direct investment (FDI) to come into it has seen both brick-and-mortar retailers and e-commerce players knock on the Government’s door to expeditiously announce a much-awaited policy for India’s retail sector.

Traditional retailers feel there should be no discrimination on the basis of channels while determining an FDI policy for the sector. On the other hand, the fast-growing e-commerce sector, driven by rapid technology adoption, is seeking unconditional 100 per cent FDI in B2C e-commerce to accelerate the sector’s growth.

“Retail is a business that should be classified on the basis of category of goods and services provided and not on the basis of channels such as brick-and-mortar stores or e-commerce,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI).

“Our contention from day one is that the Government must announce a policy that spells out whether FDI is allowed in retail sector or not.”

“The e-commerce sector is seeing huge growth and with so much investment riding on it, a comprehensive policy should have come in earlier,” Dinesh Gulati, Director, IndiaMart, a leading online marketplace for goods and services.

“There is an urgent need for a simple policy to remove confusion because currently all players in the industry are interpreting things as per their convenience.”

E-commerce revenues are $14 billion and it is growing at more than 25 per cent per annum since 2009-10, according to NASSCOM, which has been pushing for 100 per cent FDI in ecommerce.

E-commerce has seen funding to the tune of $3 billion and is growing tremendously, R. Chandrasekhar, president, NASSCOM, said in a statement. “To enable continued growth in the sector, NASSCOM has emphasised that 100 per cent FDI should be allowed in B2C ecommerce and there should not be any conditions and stipulation on investment in back end infrastructure.”

The current FDI in retail policy has put the onus on individual States to decide on FDI in retailing and in the absence of a national policy, some States have been moving forward. “Thankfully, we are seeing traction in some States like Rajasthan, Maharashtra, Andhra Pradesh and Telengana, who have been proactive with industry to evolve appropriate policies,” Mr. Rajagopalan said.

Recently, the Reserve Bank of India (RBI) stressed on the need for clarity on taxation of ecommerce transactions and suggested that States could boost their revenues by taxing the sector. The Goods & Service Tax (GST) could provide some clarity in this regard and is expected to level the field between traditional retailers and ecommerce.